Nuverra Environmental Solutions Inc (NYSE:NES) decided it was best not to wait until its scheduled earnings release on Aug. 8 to deliver the bad news. Instead, the company chose to preliminarily release second-quarter results and get all its bad news out in the open. Let’s break down the release to see if there is anything positive for investors.
Nuverra Environmental Solutions Inc (NYSE:NES) noted that several factors have been negatively affecting its business. The company pointed out that activity levels in some of the shale plays it operates in were below its internal forecasts because its customers worked at a slower pace than expected. It did allow that it sees some revenue being pushed into the second half of this year and even 2014.
One area that it was hit particularly hard was in its core Bakken operations. The region was really hurt by the weather in the quarter as high levels of snow and rain restricted vehicle access. In fact, April was the coldest month on record, while May was hit with record rainfall, which really constrained the construction of well sites.
The other big positive news is the recently signed contract with Halliburton Company (NYSE:HAL) regarding H2O Forward. The pilot project, which focuses on recycling produced water on site, could be a major driver of business for both companies. The partners could eventually take the show on the road and move into other high-growth shale plays like the Eagle Ford.
Speaking of the Eagle Ford, Nuverra Environmental Solutions Inc (NYSE:NES) isn’t having as much success in the play as it had hoped. Operational issues caused its business there to decline last quarter, which caused Nuverra to take swift action to bring in new management in an effort to remedy the situation. Nuverra really needs to fix its problems because the Eagle Ford represents a major opportunity because it’s one of the country’s fastest-growing shale plays.
In an odd twist, the company was actually affected negatively in another fast-growing shale play because it couldn’t keep up with demand. The company’s Marcellus and Utica operations were stronger than anticipated which forced it to subcontract some work, which had a negative effect on margins. Nuverra Environmental Solutions Inc (NYSE:NES) is aggressively hiring in the region and recently acquired a competitor in the Utica to expand its operations.
Nuverra Environmental Solutions Inc (NYSE:NES) really couldn’t catch a break in the second quarter. The weather slowed its business in its core Bakken operations while it couldn’t keep up with customers in the Marcellus as its business really took off. Both areas should be sorted out and look like long-term positives. The one area of concern is the Eagle Ford — the company really needs to clean up its act or else competitors will swoop in and take charge. I think the company is up to the task, and expect to see a much better second half from Nuverra.
The article Nuverra Can’t Catch a Break originally appeared on Fool.com.
Fool contributor Matt DiLallo owns shares of Nuverra Environmental Solutions. The Motley Fool recommends Halliburton. The Motley Fool owns shares of Nuverra Environmental Solutions and has the following options: long January 2014 $4 calls on Nuverra Environmental Solutions and short January 2014 $3 puts on Nuverra Environmental Solutions.
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